US concerned about economic impact of 'staggering' uni fee debt

University fees have dominated the news since the budget. In the United States the cost of university or college education is staggering. In just two decades the average debt for studying at college has more than tripled to $30,000, raising serious concerns about the effect that's having on the US economy. So concerned are American politicians that during this past week the US Senate held two hearings into the rising level of student loans, and president Obama's expected to make a statement on the issue on Monday morning.

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ELIZABETH JACKSON: University fees have dominated the news since the budget but in the United States the cost of university or college education is "staggering".

So concerned are American politicians that during this past week the US Senate held two hearings into the rising level of student loans, and president Obama is expected to make a statement on the issue tomorrow.

In just two decades, the average debt for studying at college has more than tripled to $US30,000, raising serious concerns about the effect that that's having on the US economy.

MICHAEL VINCENT: Fit, healthy, muscle-bound, he charges $80 an hour and pushes his clients hard, even on hot summer days.

Chris Boutilier studied exercise physiology at University of Miami. He finished five years ago and he has a debt of $50,000.

CHRIS BOUTILIER: You know, it's tough. It makes making larger purchases - you got to think about how you're going to budget your money each month - larger purchases like cars, houses and different things like that, it's not a consideration at the moment. It's more like I want to pay off my debts before I can consider even making a larger purchase like that.

MICHAEL VINCENT: How long do you think it's going to take you to pay off that $50,000?

CHRIS BOUTILIER: Ah, probably, current rate, it's probably about 20 years. Twenty years to pay off that debt. Wow.

MICHAEL VINCENT: What's it like knowing that - how old are you now?

CHRIS BOUTILIER: Thirty, just turned 30.

MICHAEL VINCENT: You're going to be 50.

CHRIS BOUTILIER: Yeah, I mean basically right now the idea is to pay off as much as a I can as fast as I can. But it does limit your extra expenditures each month - what I can do, places I can go - until I get that basically under control.

MICHAEL VINCENT: Percentage-wise, how much of your money each month goes into paying off your debt?

CHRIS BOUTILIER: Oh, a good 60 per cent, yeah. I mean, I'm paying - I have a monthly payment, however I try to pay above that to cut it down as quick as possible. But I have a monthly obligation every month that comes in from my student loan that I have to take care of.

MICHAEL VINCENT: "Taking care" of a student loan is something that affects 40 million Americans, and unlike Australia many of them don't have a choice about when or how they pay it back.

It's a debt that's simply deducted each and every month. If a young student can't meet those monthly payments they often call their parents to help them out, and so taking out a second mortgage on a family house to cover college fees is not uncommon. In fact, during my year here in Washington I've met civil engineers who work five days a week in an office job, then on Saturday turn up to work a double shift - that's 16 hours - as a concierge in an apartment block, just to help meet the costs of their children's university fees.

PATTY MURRAY: The statistics are staggering. Today, the average college graduate will have to pay back around $30,000 in student loans, and a record number of young households owe student debt. More young people than ever before are dealing with more student debt than ever before, and that can have lasting consequences.

Americans who took out school loans find it difficult to save and accumulate wealth. A recent study found that college graduates without student debt had accumulated seven times more wealth than those who were paying back school loans. Crushing student debt isn't just hurting borrowers: there's mounting evidence that student debt is holding back our economy.

MICHAEL VINCENT: Congress has heard that people are not only not buying homes; they're also not starting small businesses.That's got groups like bankers, builders and real estate agents concerned.

Republican Senator Ron Johnson:

RON JOHNSON: Thank you madam chair, appreciate you holding this hearing. This is, I think, an extremely important issue. I think it's a tragedy that we've enticed our children to incur now about $1.2 trillion in student loan debt collectively.

I had a finance professor in college, before we ever talked about cost capital and all the complex issues with corporate finance, you spent a day just talking about personal finance. He said the reason they call a debt instrument a bond is because when you go into debt, you put yourself into bondage and you want to really avoid that. So I certainly took that to heart.

I of course had the advantage of growing up and going to college in the 70s when college was a whole lot cheaper, worked full time and rather than leaving college with close to $30,000 in debt, I actually left college with $7,000 in the bank.

CHRIS BOUTILIER (training Eric Price): Go, go, push, push,push.

MICHAEL VINCENT: Back out on the training field in the hot summer sun, training with Chris Boutilier is his client Eric Price.

Eric's a 29 years old and about to start studying a masters degree in public service, and that will cost him $100,000.

ERIC PRICE: It's scary to think that you're this much in the negative just starting off, just trying to maintain pace. And that's really what it's about. It's not about seeing a negative or a positive in a bank account, it's really about options. And when you think about taking two steps back to take a few steps forward, hopefully, you've got to in some sense have a risk mentality involved in that. You have to know that maybe that risk is going to be worth it in the end.

MICHAEL VINCENT: You don't have a choice when you pay back a student loan here - you have to meet payments?

ERIC PRICE: You have to. You can't default; you've got to maintain minimum payments. Now there's a couple of alternatives for people. I'm going into a public policy program; if I get involved in public service, after 25 years, if I haven't paid it off, then they'll write off the remainder of the balance. But 25 years, that's a mortgage, that's a prison sentence. Nobody should be held to a point where they can't pay something off after that amount of time.

In 25 years, I'll be 55 years old. I'll be looking at retirement, and to think that I wouldn't have a masters degree loan payment paid off at that time is a little staggering and disconcerting. So the goal is to make sure that you find a position that can allow you to get that payment taken care of.

MICHAEL VINCENT: And not give up?

ERIC PRICE: And not give up, that's the truth. You've got to keep going. Just like Chris pushes me in the field, you've got to keep going and fight, economically speaking.

MICHAEL VINCENT: It's an economic fight that he and many Americans are hoping they'll win.